State Hiring Credits and Recent Job Growth

In response to job losses associated with the Great Recession, a number of states adopted hiring credits to encourage employers to create jobs. These credits provide tax breaks to employers that create jobs or expand payrolls, with the aim of increasing hiring by reducing labor costs. The evidence on their effects is mixed, although some of these credits appear to have succeeded in boosting job growth. In response to the Great Recession, state and federal policymakers adopted hiring credits to encourage employers to create jobs. However, there is virtually no evidence on the effects of such counter-recessionary hiring credits. This Economic Letter examines the effects of hiring credits adopted by states during and after the Great Recession. It draws on extensive research cataloguing and coding the features of state hiring credits, and performs statistical analysis of their effects (see Neumark and Grijalva 2013). Some types of hiring credits appear to have successfully boosted job growth. These include those targeting the unemployed and those that allow states to recapture credits when job creation goals are not met. At the same time, other credits did not work, and some appear to generate hiring without increasing employment or generate more total hiring than net employment growth. The potential effects of hiring credit